International Trade Law News

Published by Jacobson Burton Kelley PLLC

Labels: Export Controls, OFAC, Sanctions; Iran

• providing exporters with opportunities to consult on the form and content of their export ICPs;
• encouraging exporters to to submit their draft ICPs for examination and comment;
• implementing measures and stimuli that would encourage exporters to introduce ICPs (e.g., taking the development and implementation of an ICP into account when considering applications for licenses and revoking existing licenses, or making an ICP a condition for the granting of a general license for an exporter.);
• taking steps to assess an exporter’s compliance with domestic export control laws and regulations, as appropriate, which may involve face-to-face consultations and/or inspection visits. 

1. Commitment to Compliance
2. Structure and Responsibility
3. Export Screening Procedures
4. Shipment Control
5. Performance Review
6. Training
7. Record Keeping
8. Reporting and Corrective Action

WA 2011- Internal Compliance Programmes

Labels: Export Controls

• Identifying unnecessary compliance burden caused by regulations that are unduly complex, outmoded, inconsistent, or overlapping;
• Specific comments on ways to improve the existing regulations or eliminating outmoded ones;
• Aspects of the regulations the public considers effective or well designed;
• Information on foreign countries’ implementation of export controls.

Labels: Export Controls, ITAR

Labels: best practices, CEEC, Export Controls, Sanctions

Today the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) today announced that it will add fifteen parties to the Entity List. The parties, which are located in China, Hong Kong, Iran and Singapore, were added to the Entity List for their alleged roles in a procurement network involving products subject to the jurisdiction of the Export Administration Regulations and International Traffic in Arms Regulations.

The following eight parties will be added to the Entity List since it was determined that they have engaged in actions that could enhance Iran's military capability and because their conduct and deceptive practices pose a risk of ongoing violations of the Export Administration Regulations: 

• Corezing International
• Hia Soo Gan Benson
• Hossein Ahmad Larijani
• Lim Kow Seng
• Lim Yong Nam
• NEL Electronics Pte. Ltd.
• Paya Electronic Complex
• Wong Yuh Lan.

According to BIS these parties participated in a network that engaged in schemes to divert U.S.-origin items to Iran and/or to China by using shifting/circuitous routes and false or omitted information on shipping documentation in an attempt to conceal their activities. These parties are also alleged to have obtained ITAR-controlled antennas designed for use in military radars and aircraft, and exported them to Singapore and Hong Kong. The individuals named above were indicted today by the Justice Department for their alleged roles in conspiring to export U.S.-origin components to Iran that were later found in IEDs in Iraq.

The following seven parties will be added to the Entity List based on evidence that they aided and/or facilitated the activities of the procurement network.

• Action Global, Amaze International and OEM Hub Co., Ltd., all Hong Kong entities, allegedly served as front companies and are otherwise related to the other entities named today.

• Ms. Luo Jie, director of Corezing International, Action Global and Amaze International, is being added on the basis of information indicating that she was involved in the procurement and attempted procurement of U.S. power amplifiers intended for end-users in China, as well as in the diversion of various U.S.-origin goods through Hong Kong to Iran.

• Parto Systems Tehran, an Iranian freight forwarder, is being added based on information indicating that it was involved in the diversion of U.S.-origin items to Iran and is closely associated with Hossein Ahmad Larijani.

• Surftech Electronics, a Singapore corporation established by Hia Soo Gan Benson, is co-located with Corezing International and allegedly sought to purchase certain U.S.-origin items for shipment to Iran.

• Mr. Zhou Zhenyong, director of Corezing International, is being added based on information that he was specifically involved in the procurement and attempted procurement of U.S.-origin items, including U.S.-origin munitions items destined for end-users in China and/or Iran.

While a BIS license is required to export, reexport or transfer any item subject to the EAR to any of the persons listed above, BIS has established a policy of a presumption of denial for all license applications.

The BIS Entity List, found in Supplement Number 4 to Part 744 of the Export Administration Regulations, includes the names of businesses, research institutions, government organizations and individuals that have been identified as being involved in activities that merit additional scrutiny and licensing requirements.

The entries on the Entity List specify the license requirements and license review policy that are applicable to shipments to each listed entity. In some cases, a license will be required to ship items classified as EAR99 to the customer, even when a license would not normally be required. In other cases, all items subject to the Export Administration Regulations will require a license. The export license review policy also varies from entity to entity. In some cases, there is a presumption of approval or denial and, in other cases, the license will be reviewed by BIS on a case-by-case basis. Significant penalties can be imposed against parties that engage in transactions with parties on the Entity List without the appropriate license.

Update: The final rule associated with this announcement was published in the Federal Register on October 31, 2011 and is effective on that date.

Labels: Export Controls, Sanctions; Iran

Tomorrow is the last day to register for the third annual U.S.-China High Technology Working Group  (HTWG) Public-Private Sector Dialogue that will be held in Washington, DC on Monday, September 26, 2011.

The HTWG was established for the U.S. and China to provide an update on their export control policies and practices, to offer an opportunity for U.S. and Chinese companies to interact directly on these issues, and to learn from individual U.S. and Chinese exporters about the ways in which the two governments can support high technology trade for civilian end-uses.

The program, which is being presented in partnership with the National Association of Manufacturers (NAM), includes an excellent line-up of speakers, including high-level U.S. and Chinese officials from the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and China's Ministry of Commerce (MOFCOM), as well as industry panels addressing the semiconductor industry, aerospace/aviation issues and export compliance practices.

The current agenda and registration information can be found here.

Labels: China, Export Controls

The U.S. Department of Commerce's Bureau of Industry and Security today published on its website a series of new "Best Practices for Preventing Unlawful Diversion of U.S. Dual-Use Items Subject to the Export Administration Regulations, Particularly through Transshipment Trade."

These seven new best practices are being issued by BIS following last year's publication in the Federal Register of a notice of inquiry requesting public comments on a draft version of the first update to best practices on transit, transshipment and reexport of dual-use items since 2003.

In response to the notice of inquiry, BIS received written comments from industry and many additional comments through meetings with trade associations, exporters, freight forwarders, carriers, software vendors, advisory committees and other government agencies. As a result of this input, BIS substantially modified several of the proposed best practices in the final version, including combining two of the proposed best practices into one and adding a new best practice (No. 7) regarding the use of information technology.

In publishing these seven industry best practices BIS noted that, while this guidance  practices as it applies to items and transactions that are subject to the EAR, it has broader potential applications. BIS indicated that it envisions this guidance as a step toward a strengthened dialogue with all members of the export logistics supply chain industry, other agencies that administer export controls, and foreign governments in a manner that may make the guidance pertinent beyond its application to the EAR.

Best practice No. 4 is particularly noteworthy, and is likely to generate the most interest among exporters and freight forwarders, since it recommends that companies "avoid routed export transactions when exporting and facilitating the movement of dual-use items unless" there is a "long standing and trustworthy relationship" between the exporter, foreign buyer and the foreign buyer's freight forwarders. A "routed export transaction is defined in Census' Foreign Trade Regulations (15 CFR Part 30) is when a Foreign Principal Party in Interest (e.g., a non-U.S. buyer) authorizes a freight forwarder or other agent in the U.S. to facilitate export of items from the United States on its behalf and prepare and file the Electronic Export Information (EEI). Many exporters of controlled items, whether they are subject to the EAR or ITAR, already prohibit routed export transactions unless they are confident that the buyer of the goods will comply with any restrictions on the diversion or transfer of the exported products. On the other hand, many non-U.S. customers prefer to hire their own freight forwarder in the U.S., particularly when they want to consolidate shipments in the U.S. prior to being exported.

It is important to note that these best practices are recommendations only. While exporters and freight forwarders are recommended to implement these best practices, to the extent possible, there is no legal obligation to comply with these best practices, absent a legal requirement that is set forth elsewhere in the Export Administration Regulations (EAR). In addition, compliance with these best practices creates no defense to liability for the violation of export control laws. However, BIS has indicated that demonstrated compliance with these best practices by a company will be considered an "important mitigating factor in administrative prosecutions arising out of violations of provisions of the EAR that apply to transit, transshipment or reexport transactions."

While these best practices are issued by BIS and are intended for exports of dual-use items subject to the EAR, many of the same principles are applicable to exporters that export defense articles subject to the jurisdiction of the ITAR.

The following reflect new best practices that guard against diversion risk, particularly through transshipment trade.

Best Practice No. 1 – Companies should pay heightened attention to the Red Flag Indicators on the BIS Website and communicate any red flags to all divisions, branches, etc., particularly when an exporter denies a buyer’s order or a freight forwarder declines to provide export services for dual-use items.

Best Practice No. 2 - Exporters/Re-exporters should seek to utilize only those Trade Facilitators/Freight Forwarders that administer sound export management and compliance programs which include best practices for transshipment.

Best Practice No. 3 - Companies should “Know” their foreign customers by obtaining detailed information on the bona fides (credentials) of their customer to measure the risk of diversion. Specifically, companies should obtain information about their customers that enables them to protect dual-use items from diversion, especially when the foreign customer is a broker, trading company or distribution center.

Best Practice No. 4 - Companies should avoid routed export transactions when exporting and facilitating the movement of dual-use items unless a long standing and trustworthy relationship has been built among the exporter, the foreign principal party in interest (FPPI), and the FPPI’s U.S. agent.

Best Practice No. 5 - When the Destination Control Statement (DCS) is required, the Exporter should provide the appropriate Export Control Classification Number (ECCN) and the final destination where the item(s) are intended to be used, for each export to the end-user and, where relevant, to the ultimate consignee. For exports that do not require the DCS, other classification information (EAR99) and the final destination should be communicated on bills of lading, air waybills, buyer/seller contracts and other commercial documentation. For re-exports of controlled and uncontrolled items, the same classification and destination specific information should be communicated on export documentation as well.

Best Practice No. 6 - An Exporter/Re-exporter should provide the ECCN or the EAR99 classification to freight forwarders, and should report in AES the ECCN or the EAR99 classifications for all export transactions, including “No License Required” designation certifying that no license is required.

Best Practice No. 7 - Companies should use information technology to the maximum extent feasible to augment "know your customer" and other due-diligence measures in combating the threats of diversion and increase confidence that shipments will reach authorized end-users for authorized end-uses.

Labels: BIS; EAR, Export Controls, ITAR

For those readers that were not able to attend last month's Update 2011 Conference on Export Controls and Policy in Washington, DC, we are presenting a two part summary of the conference prepared by Benjamin Tarr, a law student at the American University's Washington College of Law who is focusing on international law. Below is part two, which covers days two and three of Update 2011. Part one, which covers the first day of Update 2011, can be found here.

Labels: BIS, BIS Update Conference, Export Controls

For those readers that were not able to attend last month's Update 2011 Conference on Export Controls and Policy in Washington, DC, we are presenting a two part summary of the conference prepared by Benjamin Tarr, a law student at the American University's Washington College of Law who is focusing on international law.

Day 1 - Tuesday July 19, 2011

The Update 2011 conference presented by the Commerce Department's Bureau of Industry and Security (BIS) commenced with a short welcome address from Mr. Bernard Kritzer, who serves as the Director of the Office of Exporter Services. He applauded President Obama for his August 2009 pledge to reform the export system to create a classification system which allows government organizations to focus on examining sensitive items for classification while allocating less effort to classifying conventional, non-sensitive items for national security reasons.

After Mr. Kritzer’s speech, Deputy Under Secretary for Industry and Security Daniel O. Hill addressed conference attendees. He announced that President Obama’s export control policies have succeeded, despite widespread skepticism and opposition expressed during Update 2010. Mr. Hill placed special emphasis on the fact that President Obama has led the effort to place the Defense, State and Commerce departments all on the same export control IT system, thus enabling greater efficiency in the export control process. Mr. Hill commended the participants in Update for attending, as the sold-out nature of the conference indicates a surge in interest and attention given to this field.

The morning’s events culminated with a by Eric L. Hirschhorn, Under Secretary for Industry and Security. Under Secretary Hirschhorn opined that the current export control system is based on outdated Cold War technologies and “is not responsive to current threats.” He noted that export control policy and American global competitiveness is directly linked to national security. He applauded the current efforts to implement of a more simplified U.S. Munitions List that created a tiered structural system designed to control sensitive items. This is important, according to Mr. Hirschhorn, because the private sector now manufactures most of the goods used by the military. He believes that the government should focus its resources on the most sensitive items going to countries that pose great risks to U.S. national security. Less important military items should be subject to lesser scrutiny than should items of high sensitivity.

Mr. Hirschhorn elaborated on the Administration's three-tiered control list and mentioned the recent implementation of license exception Strategic Trade Authorization (STA) where exporters can export certain items license-free, absent any specific statutory requirements, to 36 countries including Canada, Australia and countries in the European Union. Specifically, these export reform efforts have focused on eliminating “easy cases” from governmental scrutiny vis-à-vis licensing to enable government resources to focus more of its energy on cases that require further examination as to whether or not to grant licenses. License exception STA will potentially eliminate 3,000 of the 22,000 licenses issued by BIS.

Under Secretary Hirschhorn also mentioned the Administration's role in continuing the sanctions regimes on North Korea, Iran, and Cuba. He also noted BIS's role in efforts to implement UN Security Council Resolution 1540, which directs U.N. members to establish an export control system and to collaborate to advance non-proliferation and counterterrorism goals. Additionally, he noted the Executive Order requiring the BIS, FBI, and military intelligence to share information in counterterrorism efforts.

With respect to enforcement of export control laws and regulations, Mr. Hirschhorn mentioned that BIS will continue to penalize individuals for deliberate violations of BIS regulations with punishment including, but not limited to, fines, imprisonment, and a denial of export privileges. However, the penalties can be mitigated if voluntary self-disclosed. (Editor's note: the full text of Under Secretary Hirschhorn's speech can be found here.)

The next speaker was Assistant Secretary for Export Administration Kevin Wolf who noted that his three goals since joining BIS were: first, to ensure aggressive compliance with the laws and regulations that we have now; second, trying to address the biggest problems that exporters face on a day-to-day basis, such as unnecessary impediments on trade with U.S. allies and dealing with the overlap between the U.S. USML and the CCL. His long-term goal is to address the compliance burden faced by those subject to the U.S. export control system.

Assistant Secretary Wolf then provided detailed information on the recently published proposed rule on how items removed from the USML will be eventually controlled on the CCL. He also mentioned that later this year BIS will be issuing a notice soliciting public comments on efforts that can be taken to streamline and clarify the EAR and are reviewing the public comments received on the notice seeking information on making the CCL a more positive list. He noted that it is BIS's goal by the end of 2012 to have a comprehensive proposal to simplify the EAR and start addressing the regulatory compliance burdens that drain corporate resources. (Editor's note: the full text of Assistant Secretary Wolf's speech can be found here.)

The lunch speaker was William Daley, President Obama’s Chief of Staff and a former Secretary Commerce. He noted that President Obama’s goals will allow the U.S. to double its exports in five years. He also criticized the U.S. control system because it still contains two control lists, each with its own control and IT policies and noted that “One branch doesn’t know what the other is doing.” (Editor's note: The White House's summary of Daley's remarks can be found here).

In one of the afternoon break out sessions, panelists from BIS, OFAC, the State Department and DTSA briefed attendees on sanctions policy issues. Among other things, they noted the recent sanctions imposed on certain companies under the amended Iran Sanctions Act and recently listed Iran Air and Tidewater Mid East Company as supporters of Iran’s WMD program and has imposed sanctions on these two companies. Regarding the situation in Libya, BIS has suspended all licenses to Libya. However, no changes have been implemented vis-à-vis exception eligibility for licenses to Libya.

South Sudanese independence has resulted in challenges to BIS since the U.S. must decide which sanctions, if any, apply to South Sudan. Currently, South Sudan is not subject to anti-terrorism controls that previously applied to all of Sudan. But, sanctions do apply to areas where Sudan and South Sudan cooperate, including much of the oil and gas industry.

Editor's note: The presentations from the Sanctions Panel and other panel presentations can be found here on the BIS website.

Labels: BIS, BIS Update Conference, Export Controls, Sanctions

ATTUS Technologies, a leading provider of restricted party screening solutions, will be hosting complimentary breakfast seminars in Chicago, Illinois and Milwaukee, Wisconsin on "Hot Topics in Export Controls and Sanctions Compliance."

The programs, which will be presented by Washington, DC-based export controls and trade attorney Douglas N. Jacobson, will be held in Chicago on September 7, 2011 and in Milwaukee on September 8, 2011. The programs will feature the following topics:

• Update on OFAC sanctions programs on Sudan, Libya, and other countries
• Export Controls and sanctions enforcement update
• Complying with I-129 Export Control Licensing Question and Deemed Export Compliance
• Antiboycott Compliance – What you need to know
• Merger and Acquisition Due Diligence: Importance of Reviewing Compliance With Export Controls and Sanctions Laws
• Plus, the latest news and status on U.S. export control reform efforts, including license exception STA 

Registration for these program is complimentary. For further information and to register see the following links: Chicago and Milwaukee.

Labels: Export Controls, Sanctions

Today the Bureau of Industry and Security (BIS) published a final rule in the Federal Register (pdf) adding 15 parties to the Entity List and making a number of changes to other entries as a result of the agency's annual review of the Entity List.

The Entity List includes the names of businesses, research institutions, government organizations and individuals that have been identified as being involved in activities that merit additional scrutiny and can trigger licensing requirements, even for items that may not otherwise require an export license.

The 15 parties added to the Entity List included a number of individuals, companies and airlines located in Cyprus, Greece, Iran, Syria, Ukraine and the United Kingdom.  These parties were added to the Entity List for violating U.S. restrictions involving exports to Syria and Iran. As a result of being added to the Entity List, a license will be required to export any item subject to the jurisdiction of the U.S. Export Administration Regulations (EAR) to any of the 15 parties and license exceptions are not available for transactions involving these parties. In addition, there will be a presumption of denial of any license application submitted involving any of these parties.

The changes to the Entity List also included modifying a number of current entries involving entities located in Syria and China.

For further information on the importance of checking the Entity List, see our previous post entitled "Failing to Check Entity List can be Costly."

Labels: BIS, Export Controls

The following article was recently published on the ATTUS Technologies Blog and is reprinted by permission.

Failing to Check BIS Entity List Can be Costly

By Douglas N. Jacobson*

The recent payment of a $200,000 civil penalty to settle an enforcement action brought by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) serves as an important reminder to parties involved in export transactions of the need to check all restricted party lists maintained by the U.S. Government in connection with export transactions, including the Entity List.

On July 28, 2011, the Deputy Assistant Secretary for Export Enforcement signed an order approving a settlement agreement whereby freight forwarder Toll Global Forwarding (USA) Inc. agreed to pay $200,000 to settle allegations that a company that it had previously acquired, Baltrans Logistics, Inc., had arranged for the export of a number of shipments to organizations in India that were included on BIS’s Entity List.

BIS maintains three restricted party lists: the Denied Persons List, the Entity List and the Unverified List. The Entity List includes the names of businesses, research institutions, government organizations and individuals that have been identified as being involved in activities that merit additional scrutiny and licensing requirements. The entries on the Entity List specify the license requirements and license review policy that are applicable to shipments to each listed entity. In some cases, a license will be required to ship items classified as EAR99 to the customer, even when a license would not normally be required. In other cases, all items subject to the Export Administration Regulations will require a license. The export license review policy also varies from entity to entity. In some cases, there is a presumption of approval or denial and, in other cases, the license will be reviewed by BIS on a case-by-case basis.

In this case, the freight forwarder arranged for the export of electronic components and platinum pellets, both classified as EAR99, from the U.S. to Bharat Dynamics Limited and the Solid State Physics Laboratories in India. While the export of EAR99 items to India would not normally require an export license, Bharat Dynamics Limited and the Solid State Physics Laboratories were included on the Entity List at the time the shipments occurred. The BIS licensing policy for these entities was a “presumption of approval for EAR99 items” and thus an export license may have been issued if a license application would have been submitted.

Because the freight forwarder either did not check to determine whether these two organizations were included on the Entity List prior to the shipment or was not aware of the export license requirements, the freight forwarder was charged by BIS with nine violations of 15 CFR § 764.2(b), causing, aiding and abetting an act prohibited by the Export Administration Regulations (EAR).

In addition to agreeing to settle this case for $200,000, the settlement agreement requires the freight forwarder to undergo an external export compliance audit and submit the results of the audit to BIS next year. The settlement agreement also requires that any potential violations of the EAR must be submitted to BIS for review and that the failure to pay the penalty or submit the audit results as required could lead to a denial of the freight forwarder’s export privileges.

While Bharat Dynamics Limited and the Solid State Physics Laboratories were removed from the Entity List on Jan. 25, 2011, BIS adds new parties to the Entity List and the other lists that it maintains on a regular basis. The charging letter, settlement agreement and other documents related to this case can be found here.

*Douglas N. Jacobson is a Washington, D.C.-based attorney who specializes in export controls, sanctions and other international trade legal issues. He can be reached at (202) 431-2407 or info@djacobsonlaw.com.

Labels: BIS, Export Controls

Below is the press release issued today by the U.S. Department of Commerce announcing the issuance of the final rule on License Exception Strategic Trade Authorization (STA) that is the subject of the previous post. I will leave it to readers to determine whether License Exception STA is actually a "major" or "significant" step forward in the export control reform process.

Commerce Department Implements New Export Control Rule to Enhance National Security, Facilitate Trade

Major step forward in President's reform initiative to modernize export control system

Washington, DC (MMD Newswire) June 16, 2011 - - U.S. Commerce Secretary Gary Locke today announced the next step in President Obama's export control reform (ECR) initiative aimed at strengthening U.S. national security and ensuring the competitiveness of American companies abroad. The Department will implement today a new license exception, Strategic Trade Authorization (STA), that will facilitate exports between the United States and partner countries while enhancing the competitiveness of key industrial base sectors.

The Export Control Reform Initiative aims to build higher fences around a core set of items whose misuse can pose a national security threat to the United States. By facilitating trade to close partners and allies, the Commerce Department can better focus its resources ensuring the most sensitive items do no end up where they should not.

"This is an important first step towards creating a system that addresses the serious threats we face in today's changing economic and technological landscape. This new license exception will eliminate the need for U.S. exporters to seek licenses in nearly 3,000 types of transactions annually, affecting an estimated $1.4 billion in goods and technology," Commerce Secretary Gary Locke said. "The new license exception will allow us to focus our resources on items that pose a significant national security risk and help facilitate U.S. exports."

"This is a significant step in President Obama's Export Control Reform Initiative which enhances our national security and makes U.S. exporters more competitive by easing their licensing burden for exports to partners and allies," said Under Secretary of Commerce for Industry and Security Eric L. Hirschhorn.

Items such as electronic components for use on the International Space Station, cameras for search and rescue efforts for fire departments, components for civil aviation navigation systems for commercial aircraft, airport scanners, and toxins for vaccine research will be eligible for the new license exception.

At the same time, the license exception establishes new safeguards designed to ensure Department of Commerce approval is obtained before controlled items exported under the exception are re-exported outside of authorized destinations.

To see a copy of the regulation published in the Federal Register Notice, go to http://www.gpo.gov/fdsys/pkg/FR-2011-06-16/pdf/2011-14705.pdf.

Background

The President has directed a broad-based interagency reform of the U.S. export control system with the goal of strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on current threats and adapting to the changing economic and technological landscape.

Labels: BIS, Export Controls

As part of the ongoing export control reform process, the Bureau of Industry and Security today published in the Federal Register (PDF version of notice) the anticipated new license exception Strategic Trade Authorization (STA).

Under the U.S. Export Administration Regulations, a license exception authorizes the export or reexport of eligible products, software and technology without having to submit a license application and obtain a license from BIS as long as the specific conditions of the license exception are followed.

While License Exception STA will take effect immediately for eligible products, software and technology, as discussed below, it will take some time before the Automated Export System (AES) is modified by the Census Bureau to add the appropriate code in AES.

The scope of the final version of License Exception STA was significantly changed from the version included in the proposed rule published in December 2010. For example, the list of countries eligible to export controlled items that are considered to be less sensitive items was narrowed from 125 countries to eight. Although the final rule does not mention the reason, Ukraine was removed from the list of STA eligible countries.

In addition, based on input received during the public comment period BIS has clearly indicated that License Exception STA can be used for "deemed exports."

According to the final rule, License Exception STA can only be used to export products, software and technology in specific Export Control Classification Numbers (ECCNs) on the Commerce Control List without a license to the following 36 countries (known as 740.20(c)(1) destinations):

Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

ECCNs eligible to be exported to these 36 countries are indicated by the designation "STA" in the License Exception section of the particular ECCN.

For certain ECCNs involving less sensitive items, software and technology, the following eight additional countries (known as 740.20(c)(2) destinations) are eligible for license exception STA shipments:

Albania, Hong Kong, India, Israel, Malta, Singapore, South Africa, and Taiwan.

However, items controlled for national security reasons are not eligible to be exported under STA to these eight countries and are indicated by "exclusion paragraphs" in the specific ECCN text. 

In addition, items on the Commerce Control List that are subject to control for encryption (EI), short supply (SS), surreptitious listening (SL), missile technology (MT), chemical weapons (CW), and human rights reasons are not eligible for License Exception STA because of various requirements imposed by statutes, treaties or U.S. implementation of international commitments.

The final rule made some favorable changes to the notification requirement contained in the proposed rule. However, the following three conditions will apply to exports, reexports and transfers made under STA:

Condition 1. The consignee must be furnished with the ECCN that applies to each item transferred under License Exception STA. The ECCN notification needs to be made only once for each item to be shipped. As long as the ECCN remains accurate, it does not need to be refurnished for subsequent shipments.

Condition 2. Consignees must provide, prior to the shipment, the following written statement identifying the items to be shipped and restating the ECCN(s) to be shipped.

[CONSIGNEE NAME]:
(i) Is aware that [INSERT DESCRIPTION AND APPLICABLE ECCNS OF ITEMS TO BE SHIPPED] will be shipped pursuant to License Exception Strategic Trade Authorization (STA) in § 740.20 of the United States Export Administration Regulations (15 CFR 740.20); (ii) Has been informed of the ECCNs noted above by [INSERT NAME OF EXPORTER, REEXPORTER OR TRANSFEROR];
(iii) Understands that items shipped pursuant to License Exception STA may not subsequently be reexported pursuant to paragraphs (a) or (b) of License Exception APR (15 CFR 740.16(a) or (b));
(iv) Agrees not to export, reexport or transfer these items to any destination, use or user prohibited by the United States Export Administration Regulations; and
(v) Agrees to provide copies of this document and all other export, reexport or transfer records (i.e., the documents described in 15 CFR part 762) relevant to the items referenced in this statement to the U.S. Government as set forth in 15 CFR 762.7.

The consignee’s written statement must be maintained as well as a log or other written record that identifies each shipment associated with a particular statement.

Condition 3. The consignee must be notified in writing that the shipment is made pursuant to License Exception STA. The notice must either specify which items are subject to License Exception STA or state that the entire shipment is made pursuant to License Exception STA. The notice must clearly identify the shipment to which it refers. The written notice may be conveyed by paper documents or by electronic methods such as facsimile or email.

For "deemed exports," the ECCN notification, consignee statement, and destination control statement requirements are replaced with a requirement that the releaser of the technology or source code notify the recipient in writing of the restrictions on further release and other requirements.

As with all BIS license exceptions, the applicable license exception symbol and code will have to be reported in Electronic Export Information (EEI) filings, regardless of the value of the shipment. The U.S. Census Bureau will soon modify the Automated Export System (AES) by adding a new License Type Code for License Exception STA.

BIS has previously indicated that License Exception STA has the potential to eliminate approximately 3,000 individual licenses that BIS issued last year. Given the narrowed scope of the final version of STA, this number is likely to be reduced. Nevertheless, even if a smaller number of individual licenses do not have to be obtained by U.S. exporters, License Exception STA is a positive development.

Labels: BIS, Export Controls

Today, Representative Howard Berman (D-CA), the Ranking Member on the House Foreign Affairs Committee introduced what is expected to be the first of several bills to update the U.S. dual-use export control system. Such a bill is needed because the Export Administration Act of 1979 (EAA), the last major export control bill enacted by Congress, lapsed in August 2001 and the Export Administration Regulations have remained in effect as a result of successive presidents invoking the International Emergency Economic Powers Act (IEEPA).

Representative Berman's 68 page bill, entitled the Technology Security and Antiboycott Act (pdf) (no bill number assigned as of this writing), would repeal the EAA and replace the authority in that law with a new statutory scheme that reflects the numerous technological advances and global changes that have occurred since 1979.

The following are some of the key aspects of the Technology Security and Antiboycott Act:

• Provides the President with authority to deploy controls to counteract current and future national security threats, including rogue governments, terrorist organizations, and other non-state actors that seek to attack the U.S. and its allies.

• Modernizes the definition of "national security" to include sustaining U.S. leadership in science, manufacturing and our high-tech workforce, and requires the President to balance traditional security goals with maintaining U.S. academic and manufacturing leadership in applying controls.

• Updates the definition of "dual-use" to include capable of being used in terrorist or cyber attacks. 

•  Establishes a process for regular review of the Commerce Control List to ensure that new items are adequately controlled and that the level of control of items on the lists are adjusted as conditions change.

• Requires control lists to be published in a form that facilitates compliance by small and medium sized businesses and academic institutions.

• Retains IEEPA penalty structure of maximum criminal penalties of $1 million or 20 years in prison and maximum civil penalties of $250,000 or twice the amount that this the basis of the violation.

• Civil penalties for export violations would be based on seriousness of the violation, culpability of the violator and violator's record of cooperation with the government.

• Provides that penalties for export and antiboycott violations would be subject to judicial review.

• Requires the publication of "best practices" guidelines to assist persons in developing and implementing, on a voluntary basis, effective export control programs.

• Provides that implementation of an effective export compliance program should be mitigating factors in civil penalty cases.

• Requires civil aircraft parts certified by the Federal Aviation Administration to be subject to dual-use controls under the Technology Security Act and not the International Traffic in Arms Regulations (ITAR).

• Establishes the Transfer Policy Committee, a high-level interagency management group responsibility for overall administration, rule-making and oversight of export controls. 

• Reenacts provisions authorizing the antiboycott authority and non-proliferation (missile and chemical and biological) functions of the U.S. government.

Labels: Export Controls

The Trusted Trade Institute is holding a one-day program on European Union (EU) export controls on July 18, in the Washington, DC area.

The program, entitled "EU Export Controls for North American Trade Compliance Professionals" is being held the Monday before the annual BIS Update Conference on Export Controls, in order to allow those who reside outside of the Washington, DC area to attend both programs in one trip.

This Special Master Class is designed to give participants an overview of the essentials of EU dual-use export controls, with an introduction into the complexity presented by the national administration
of those controls (and their own additional controls) by the individual EU Member States.

Led by a senior official of Germany’s export control agency, this program will outline parallels and contrasts between the EU and US regulatory systems. The program will feature practical presentations and information presented by leading export control attorneys and consultants from the perspective of both
in-house counsel and outside counsel/consultants. The program will also feature keynote remarks by Kevin Wolf, the U.S. Department of Commerce’s Assistant Secretary for Export Administration.

Further information on these programs, including the agenda, speaker bios and registration information, can be found below. The direct registration page can be found here.

EU Export_Controls_2011_Trusted Trade Institute July 18, 2011

Labels: Export Controls